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MARKET UPDATE: This morning (and yesterday) I said that a major bear market rally was coming and I guess a near 900 point move higher in the Dow qualifies. Look, I’ve been in this game since 1985 and if I’ve learned one thing in those 23 years its this: you only get these kinds of massive one day moves during a bear market rally. I would be VERY surprised if we look back on this move and said “wow, so that 900 point move up was the sign that the market had bottomed, and that I should have gotten back into stocks”. It just doesnt work like this (remember the 900 point move higher of a couple of weeks ago?)…I believe that we will (soon) be going back down and testing the lows.
It’s still likely that we have a ways to go on this rally, and my best guess is that we open sharply higher again tomorrow into the announcement by the FED that they are dropping interest rates at least a 1/2 point, along with global coordinated rate cuts that I expect as well.
IMPORTANT: Buy The Rumor and Sell the News! Smart investors LIVE by this axiom, and novice investors make decisions just the opposite way. Make sure you are the “smart money” if you are in fact trading this market at all. Personally, I will be selling into the afternoon rally…assuming it even lasts that long. Once the market starts to reverse (after the rate cut is announced) the sell-off could be fast and brutal.
Finally, if you have been looking for an opportunity to sell some stocks and raise some case, tomorrow (or possibly the next few days) will be that opportunity. Ideally, you will then be sitting pretty when the market comes back down. Not a day goes by that I don’t read horror story after horror story about people/and or their company’s blowing up because of major debt issues or margin calls. Unfortunately, this is just beginning of the recession, so if you decide to listen to the CNBC pollyannas telling you to buy, buy, buy….just remember that there’s still lots of bad news on the way, and that this bad news will make it very tough for most stocks to go higher.
I could well be wrong….this could be the market bottom. I’m just not going to be a hero and try to pick the bottom. Knife catching has never been very much fun for me.